Shifting fortunes

 

Tracing the divergence in industry performance at India Inc.

Report | June 2016 | Kanvic Grey Matter

by Deepak Sharma, Ravindra Beleyur, Vlad Flamind, Gehan Wanduragala, Guillaume Santesmases

A handful of sectors now capture the lion’s share of corporate India’s profit pool

While the headline falls in profitability at India Inc. are dramatic, an equally significant insight from the Kanvic Performance Navigator is how the remaining profits have shifted between sectors.

 

In 2010 the five most profitable industry sectors accounted for 39% of the corporate profits at India Inc. By 2015 these five same sectors had captured three-quarters of entire profit pool. Almost doubling their share in only five years.

The big winners in this profit shift have been sectors like automotive and auto-components whose share of profits have risen almost three-fold. They have gained on the back of strong consumer demand fuelled by rising income growth.

 

Similarly, the knowledge intensive industries of IT and Healthcare (which is dominated by Pharmaceuticals) have more than doubled their share of the profit pie, thanks to their ability to deliver lower costs to export clients around the world. Meanwhile the utilities sector has seen steady gains in its profit share.

In stark contrast, industries like capital goods, construction, and metals & mining have seen massive falls, plummeting to net losses at the sector level.

 

The slow-down in India’s industrial growth hit the capital goods sector hard, while the temporary cessation of coal mining following court rulings had a major impact on metals and mining. Likewise a cooling in the real-estate sector combined with delayed approvals for key infrastructure projects to dent profitability in the construction space.

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